(Feb-20) US President Donald Trump is urging Ukraine to quickly negotiate a peace deal with Russia, which has raised concerns among European allies about a potential shift in US support for Ukraine. Additionally, Trump has mentioned the possibility of imposing a 25% tariff on lumber, adding to the uncertainty in the market.
The rand fell by 0.63% to a high of 18.5933 after the budget was postponed to March 12 due to disagreements within the GNU over a proposed 2% VAT hike. The VAT increase aimed to reduce government debt, which stands at around 5.5 trillion rand, with interest payments consuming 22% of annual revenue.
In commodities, oil prices remain fairly unchanged, and Gold prices continue to trade in its all time high zones as investors look to diversify to safe heaven assets:
Against the crosses:
(Feb-13) CPI print yesterday supported FEDs decision to hold rates steady and the general talks between US and Rassia to end the war has boosted risk sentiments.
(Feb-17) We saw a general USD weakness on Friday across the board which was related to various factors and optimism around de-escalating geopolitical risks, this however is still not yet confirmed.
(Feb-19) President Donald Trump announced plans to impose 25% tariffs on automobile, semiconductor, and pharmaceutical imports, with an announcement expected by April 2. He aims to give companies time to establish US-based operations to avoid tariffs. These new levies could significantly impact industries and lead to higher consumer prices, particularly affecting countries like Mexico, South Korea, Malaysia, and Singapore.
(Feb-10) SA’s Finance Minister, Enoch Godongwana, will deliver the 2025 Budget Speech on Wednesday, February 19th. The speech will outline the government’s financial, economic, and social commitments for the year, focusing on balancing economic growth with support for vulnerable communities.
(Feb-17) Volumes improved towards the end of the week, with 3 days trading higher that the recent ADV.
(Feb-18) Pull back in volumes due to US holiday on Monday.
(Feb-13) Clients ended yesterday being net-short ZAR: - Range for today: 18.60 - 18.30.
(Feb-17) Saw the market reject the move lower in ZAR, with implied topside at 18.65.
(Feb-10) Clients are now net-long USDZAR.
(Feb-11) We see continued net-long positions in ZAR.
(Feb-17) Saw the market reject the move lower in ZAR, however the the weaker USD on Friday (Feb-14) saw ZAR hitting lows of 18.2995.
(Feb-18) ZAR made the expected correction yesterday to 18.45. Given that we failed to break above 18.50, a move lower but above 18.30 is likely.
(Feb-19) Rand set for a good day today as we see ZAR failing to break above 18.50 in the recent days.
(Feb-20) Some budget highlights [which has now been postponed] included targeting a primary balance surplus to stabilize debt and raising VAT by 2 percentage points to 17%, which was expected to generate R60 billion annually and slightly increase inflation, which in turn, pushes the SARB rate cuts far out. Debt-to-GDP is projected to peak at 76.1% in 2025/26 before moderating to 74.8% by 2027/28.
(Feb-17) Volumes muted today as its a US holiday.
(Feb-18) Rand shows zero interest of making moves today, we remain at that rand volume weighted price of 18.40.
(Feb-19) Spread remain wide as a result of the postponement of the Budget to 12-March.
By Thuto Mukena - Institutional Sales Specialist (Feb-20)
Local Implied vols had been steadily grinding lower this week as the market priced in the local budget as a non-event. However, what was expected to be a non-event turned into a non-budget. Just minutes before Finance Minister Godongwana was set to deliver his speech, headlines emerged about an urgent cabinet meeting, delaying the budget announcement to March 12 due to disputes over a proposed 2 percentage point VAT hike to 17%. This caught the vol market off guard, triggering a sharp repricing. USD/ZAR 1-week implied vol spiked by approx. 1.5 vol p.p as uncertainty took hold. On the day spot initially showed resilience, with the Rand firming to R18.3177/$ in early the early hours, but sentiment quickly turned as risk conditions exchanged hands. By the close, USD/ZAR had weakened to R18.5048/$, making the Rand the worst EM performer on the day after the Peso.
Tariffs and peace talks remain the dominant themes driving market sentiment this week. The key risk event of the day was the release of the Fed minutes, which reaffirmed that the Fed is in no rush to cut rates until inflation shows clearer signs of moderation. This backdrop continues to support strong U.S. dollar momentum across most pairs. On the implied vol space, both EM and G10 implied vols had a choppy session, with EUR/USD 1-week implied vol leading the moves as the euro remained under pressure amid U.S.-Europe divisions. USD/CAD 1-week implied vol also saw some action, the tenor edged higher, rising by 16bps from the open. In the high-beta space, USD/CNH 1-week implied vol led the move lower, dropping by 65bps, trailing USD/TRY 1-week implied vol.
By sizwe Mfayela - Institutional Sales Specialist (Feb-14)
Egypt
Kenya
Ivory Coast
Nigeria
Rwanda
Senegal
Zimbabwe
Eurobonds
NGERIA
ANGOL: Locals sold into ETF and street bids
IVYCST: Flows were relatively light, but overall turned two-way, with the bid for the $ bonds on the curve going softer.
KENINT: Some fiscal-related headlines yesterday but flows were muted, with locals net sellers of risk to add to the real money account selling.
SENEGL: Was very much in price discovery in a 3pt range since the headlines hit on Wednesday as bid and offers felt very skittish, forcing swift repricing on each print. Overall, SENEGL underperformed on the day with the curve bear flattening.
SOAF: An active session with headlines keeping flows on the curve two-way. US PPI came out higher than expected - after a higher-than-consensus CPI print yesterday - but that softened the bid only for a split second. Real money and ETFs were net buyers of risk, whilst there was selling from the street. Long-end continued to trade better, with front-end bonds catching a bid.
Economic data releases